A Restaurant Is Facing a Decision About Whether It Should

question 59

Multiple Choice

A restaurant is facing a decision about whether it should bake its own dinner rolls or whether it should continue to purchase the dinner rolls from a local bakery. Which of the following costs would be relevant to its decision?

• A) The salary of the restaurant manager
• B) The purchase price of the dinner rolls purchased from the local bakery
• C) The price the restaurant sells the dinner rolls for
• D) The original purchase price of the current machinery

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Definitions:

$1 Par Value

The nominal or face value assigned to a share of stock, with no necessary relation to the market value, set at $1 per share.

Earnings Per Share

A financial metric that divides net income by the number of outstanding shares, indicating the profit available to each share of stock.

Treasury Stock

Stocks initially released and later repurchased by the company that issued them, leading to a reduction in the available shares on the public market.

Purchases

The total amount spent on buying goods and services for either resale or use in production in a specific accounting period.